Hermelin family moves to change KV bylaws
Written on August 9, 2009
Marc Hermelin, the ousted head of KV Pharmaceutical Co., and other family members are taking steps that could give them greater influence over the troubled drug maker’s board of directors.
The group, composed of family members and representatives of various trusts, is proposing to change the Brentwood-based company’s bylaws so that majority shareholders would have the power to amend the bylaws, according to a filing Wednesday with the Securities and Exchange Commission. The group holds 63 percent of KV’s controlling Class B shares.
Other proposed changes include requiring a unanimous vote by the board to approve issuance of new securities with voting rights, any increase in the number of board members, and any deals that could affect the rights of shareholders to elect or remove board members.
The family members are seeking changes through the written consent process under Delaware corporate law, which allows majority shareholders to make changes to bylaws. KV is incorporated in that state.
In the regulatory filing, the group — which includes Marc Hermelin’s brother Arnold and the ousted CEO’s two sons, David and Joshua — also noted that they were concerned by the company’s disclosure last month of serious financial difficulties and that they would review possible actions to "protect their investment." Such action could include plans to fill board vacancies, changing the number of directors or other similar steps. Both Marc Hermelin and David Hermelin already are on the board.
The moves come eight months after the board fired Marc Hermelin, who was chairman and CEO instant credit report. Though declining to elaborate on those reasons, the board did say at the time it was for "just cause."
In the filing, family members said they would not seek the reinstatement of Hermlin as chairman or as an officer in the company.
Phillip Stanton, a lawyer listed on the SEC filing, said he could not comment; he also declined to provide the name of someone who could. A KV spokesman could not be reached for comment.
Less than 18 months ago, KV Pharmaceutical was a high-flying maker of generic and branded drugs, ending its 2008 fiscal year with a 36 percent growth in sales and a 52 percent surge in profit.
But then a series of manufacturing problems led to drug recalls and forced the drug maker to stop all production earlier this year. It later agreed to a court order that bars it from resuming production until it meets standards set by the Food and Drug Administration.
In a filing with the SEC last month, KV outlined its financial difficulties and reiterated concerns about the company’s future. It said there are significant uncertainties regarding its ability to continue as a going concern during the coming fiscal year. It expects its accounting firm KPMG LLP will highlight this doubt when the results are filed.
Filed in: economics.